COMMISSIONER OF INCOME-TAX Vs. M L BHAPKAR

JUDGEMENT

(1.) THIS reference is in relation to the assessment year 1961-62. The Revenue has obtained a reference under section 256 (1) of the Income-tax Act, 1961 ("the Act"), of the following two questions for the opinion of this court :

(2.) WHETHER, on the facts and in the circumstances of the case, the Tribunal ought to have in any case held that the transaction in filing the suit for refund of octroi duty, obtaining a decree and recovering the decretal amount along with interest was an adventure in the nature of trade ?" 2. The assessee is a legal heir of one deceased, M. M. Bhapkar, who was carrying on business as partner of a partnership firm in the name and style of N. L. Bhapkar and Co. The partnership carried on business as carting agent. After the original assessment for the assessment year 1961-62 had been completed, the Revenue issued notices under section 147 (a), read with section 143 (3) of the Act for reopening of the assessment proceedings. The reason given was that the assessee had received a sum of Rs. 4,12,172 plus an amount of Rs. 66,350 (as interest upon the former amount) from the Poona Municipal Corporation. The said amount represented ten per cent. of the octroi duty which was retained by the Poona Municipal Corporation on behalf of the merchants who transported their goods through its territorial jurisdiction for whom the assessee had acted as an agent with the Poona Municipal Corporation. The ten per cent. of the octroi duty paid which had been initially retained by the Poona Municipal Corporation came to the refunded by the said corporation in view of the decision of the Supreme Court in Poona City Municipal corporation v. Dattatraya Nagesh Deodhar, AIR 1965 SC 555. The Supreme Court took the view that the corporation did not have any authority to retain the ten per cent. of octroi duty which it had charged on transit good from the merchants transporting the goods through its territorial jurisdiction. It was, in consequence of the law laid down by the Supreme Court in Dattatraya nagesh Deodhar's case, AIR 1965 SC 555, that the corporation had to refund the amount as aforestated to the assessee, N. L. Bhapkar and Co. , from whom it had collected the said amount initially. Since the amount had been retained in is hands illegally, the corporation had to pay interest on the principal amount which has been already stated.

(3.) THE Income-tax Officer, in the assessment proceedings, held that the amount refunded by the poona Municipal Corporation to the assessee was a trading receipt which would be liable to be include as income in its hands. This view was reversed by the Appellate Assistant Commissioner in appeal. On further appeal, the Tribunal confirmed the view of the Appellate Assistant commissioner and held that the assessee had received the said amount from the said corporation merely as an agent or trustee of person on whose behalf it acted as an agent and that there was no element of trading receipt involved in the receipt of the said amount on the part of assessee. In arriving at this decision, the Tribunal followed the earlier decision of the High Court in the case of Smt. Lilavati F. Shah [1990] Tax LR 946 (Bom ).